Crude oil rose from an 18-month low in New York on concern that supplies may fall amid OPEC production cuts and Iran's latest snub to efforts to end its nuclear program.
President Mahmoud Ahmadinejad said on January 3 that Iran will start producing nuclear fuel on an industrial-scale soon. OPEC will lower output by 500,000 barrels a day beginning February 1, adding to the 1.2 million barrel-a-day reduction starting November 1. „Given the OPEC output cut and renewed geopolitical concerns, crude oil below $60 is undervalued,” said Makoto Takeda, energy analyst at Bansei Securities Co. in Tokyo.
Crude oil for February delivery gained as much as 42 cents, or 0.8%, to $56.01 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $55.96 at 2:04 p.m. Singapore time. Yesterday the contract fell $2.73, or 4.7%, to $55.59, the lowest close since June 15, 2005. Prices have plunged 8.9% in the past two days. They closed yesterday 12% lower than a year earlier. Brent crude oil for February settlement climbed 36 cents, or 0.7%, to $55.47 a barrel on the London-based ICE Futures exchange at 1:54 p.m. Singapore time.
Iran is determined to „achieve peaks of success and defend its interests powerfully,” the state-run Islamic Republic News Agency quoted Ahmadinejad as telling supporters in Khuzestan province on January 3, in a reference to the nuclear project. Oil rose to a record last year on concern that Iran will disrupt oil supplies amid a confrontation with the United Nations over nuclear development. Iran is the second-biggest producer in the Organization of Petroleum Exporting Countries, which pumps 40% of the world's oil.
Home-heating demand in the Northeast US will be 40% below normal through January 11, forecaster Weather Derivatives said yesterday. Mild temperatures will persist through the end of next week across cities such as Chicago and New York, the US National Weather Service said yesterday. „Oil prices may be declining to as low as $50 a barrel in the short term,” said Ken Hasegawa, a manager of the international division at commodity futures broker Himawari CX Inc. in Tokyo. „Recent declines have been driven by warmer-than-normal weather worldwide.”
Thermometers in New York will rise to 64 degrees Fahrenheit (18 Celsius) today, 25 degrees above the normal high, the National Weather Service said. January is normally the coldest month in New York. „We just haven't seen much in the way of winter weather and the weather service indicated next week's going to be more of the same,” said James King, who manages the $51 million Rydex Commodities Fund in Rockville, Maryland. US stockpiles of distillate fuel, a category that includes heating oil and diesel, jumped 1.97 million barrels to 135.6 million last week, the biggest increase since the week ended September 22, the US Energy Department reported.
A gain of 835,000 barrels was expected, according to the median of 13 responses in a Bloomberg News survey. „There's warm winter weather in the US northeast and inventories are proving difficult to be drawn down,” said Hiroyuki Kikukawa, associate director of research at futures broker Nihon Unicom Corp. in Tokyo. Gasoline stockpiles rose 5.68 million barrels to 209.5 million barrels, the biggest one-week gain since the week ended September 22, the report showed. (Bloomberg)